21-Year-Old Dropouts Raise $2M for Givefront, a Nonprofit Fintech

The Evolving Landscape of Nonprofit Financial Management

The past ten years have witnessed a significant transformation in how U.S. businesses handle their finances, largely driven by innovative fintech companies. Businesses benefited from streamlined corporate cards through Brex, automated spend controls via Ramp, and a modernized banking experience with Mercury. However, this wave of financial innovation has, until recently, largely bypassed the nonprofit sector.

Introducing Givefront: A Platform for Nonprofits

Givefront, a startup supported by Y Combinator and spearheaded by 21-year-old Matt Tengtrakool, a former Harvard student, and Aidan Sunbury of UC Berkeley, is poised to address this gap. The company is developing a dedicated financial platform tailored to the unique needs of nonprofit organizations, encompassing food banks, animal welfare groups, NGOs, churches, and homeowner associations.

Nonprofits contribute trillions of dollars annually and represent approximately 6% of the U.S. GDP. Despite their substantial economic impact, many continue to rely on outdated and inefficient financial tools.

The Genesis of Givefront: Identifying a Critical Need

Tengtrakool’s journey began with experimentation in microloan aggregation in Nigeria. Subsequently, his direct involvement within various nonprofits during his studies at Harvard – even leading several organizations – illuminated a significant deficiency. He observed that these organizations faced stringent regulatory demands and reporting obligations, yet lacked the modern financial tools readily available to for-profit businesses.

“My interest in financial systems naturally led me to this endeavor,” Tengtrakool explained to TechCrunch. “While assisting in the operation of these nonprofits, it became clear that many lacked the necessary financial tools to ensure compliance and safeguard their tax-exempt status. The tools they used were significantly behind the curve compared to modern startup standards.”

From Internal Tool to Dedicated Platform

Initially, Tengtrakool created the first iteration of Givefront to address these internal challenges. This internal tooling quickly expanded to serve local nonprofits nationwide. The team subsequently focused on building a comprehensive financial platform exclusively for the approximately 1.9 million registered nonprofit organizations in the U.S.

Givefront initially envisioned a broad scope encompassing both banking and accounting services when entering Y Combinator Winter 2024. However, the team quickly realized that persuading nonprofits to overhaul their existing accounting systems or banking relationships presented a considerable hurdle, prompting a strategic shift towards cards and spend management.

“Securing an organization to adopt a new card is demonstrably easier than replacing their entire accounting infrastructure,” Tengtrakool noted.

Differentiating Givefront: A Nonprofit-Centric Approach

While offering functionalities similar to corporate spend platforms like Ramp and Brex, Givefront distinguishes itself through its exclusive dedication to the nonprofit sector.

Nonprofits operate within a unique set of constraints. They must manage both restricted and unrestricted grants, provide detailed spending reports to donors and foundations, account for volunteer expenses, and fulfill IRS Form 990 disclosure requirements. Managing numerous grants, each with specific spending and reporting rules, is a common challenge.

Integrating with Existing Systems

Established nonprofit systems like Blackbaud, Sage, and MIP currently dominate the market, but often lack real-time spend controls, modern approval processes, and seamless integration with the tools nonprofits increasingly rely upon.

Givefront doesn’t aim to replace these existing systems, but rather to function as a complementary layer. The platform integrates with legacy accounting software, adding nonprofit-specific spend controls, automated receipt capture for audits, grant-based budgeting, and automated reporting capabilities.

“The workflows we are developing are specifically designed for the nuances of this economic sector,” Tengtrakool stated. “Our workflows and integrations represent a substantial improvement – a 10x enhancement – compared to conventional corporate or spend management tools.”

Revenue Model and Future Expansion

Givefront generates revenue through card interchange fees and subscriptions associated with its bill pay feature. The company plans to diversify its revenue streams by introducing additional products, including payroll services, banking solutions, budgeting tools, and potentially investment and endowment management.

Growth and Adoption

Since launching its card program approximately six months ago, Givefront has onboarded hundreds of organizations and is experiencing over 200% month-over-month growth in both revenue and total payment volume. The company anticipates serving around 1,000 nonprofits by year-end, with a long-term objective of reaching 5,000 organizations by mid-next year.

Navigating Challenges and Building Trust

Tengtrakool acknowledges that the team’s youth, including a 17-year-old founding engineer, has presented both advantages and challenges. While some nonprofit leaders appreciate the fresh perspective, others express hesitation about entrusting financial infrastructure to such a young team.

Churches and religious organizations have demonstrated the strongest adoption rates. Many rely on volunteer treasurers rather than dedicated finance staff, and Givefront’s automation significantly reduces their administrative workload.

Securing Investment for Future Growth

The company recently secured $2 million in funding, led by Script Capital, with participation from Y Combinator, C3 Ventures, Phoenix Fund, and angel investors, including the CEOs of Chariot and Wealthfront. This seed investment will be used to expand distribution, grow the team, and enhance the card and bill pay offerings.